Economic data released by the Bureau of Economic Analysis on July 28 showed that economic growth in the United States is weakening. Because excess oil production capacity does not exist anywhere in the world, a coordinated reduction of oil exports between any or all of the world's largest oil exporters of just five percent would quickly send international oil prices toward $125 per barrel. An increase in oil prices of this magnitude could be expected to push the United States economy into recession.
Power and Interest News Report (PINR) http://www.pinr.com [EMAIL PROTECTED] +1 (312) 242-1874 ------------------------------ 31 July 2006 For all of PINR's analyses on the current situation in Lebanon, please see: "Escalating Conflict in the Middle East Could Spark a Global Recession" http://www.pinr.com/report.php?ac=view_report&report_id=532 "Intelligence Brief: Israel's Strategic Security" http://www.pinr.com/report.php?ac=view_report&report_id=529 "The Role of Iran and Syria in the Israel-Lebanon Crisis" http://www.pinr.com/report.php?ac=view_report&report_id=528 ------------------------------ Escalating Conflict in the Middle East Could Spark a Global Recession Drafted By: Jephraim P. Gundzik http://www.pinr.com Efforts by Washington and Tel Aviv to militarily establish a new Middle East are designed to weaken the growing power of the Shi'a alliance between Lebanon, Syria and Iran in favor of an alliance between moderate Sunnis and Israel. International opposition to the establishment of a new Middle East is much fiercer than understood in either Washington or Tel Aviv. This opposition, which counts Russia and most moderate Arab states as well as Syria and Iran among its ranks, is likely to strike against the United States where it is most vulnerable -- its weakening economy. A successful economic strike against the United States has the possibility of triggering a global economic recession in 2007. Battle for the New Middle East Shortly after the eruption of the war between Israel and Lebanon, the Bush administration made it clear to the world that it would not use its influence over Tel Aviv to promote an immediate cease-fire. To the contrary, Washington sanctioned Israel's massive bombing of Southern Lebanon as a means to disarm Hezbollah and weaken the anti-Israel and anti-U.S. Shi'a alliance that binds Iran, Iraqi Shi'a, Syria and Hezbollah together. At the U.N.-sponsored conference on the Israel-Lebanon war held on July 26 in Rome, all participants including Britain, Washington's staunchest ally, agreed that an immediate cease-fire by Israel was imperative. U.S. Secretary of State Condoleezza Rice was isolated in her demand that any cease-fire must include the disarming of Hezbollah and the Lebanese Army assuming control over Lebanon's borders. Strong U.S. opposition to an immediate cease-fire led to the failure of the Rome conference. Israel turned this failure into success by claiming it had received "permission from the world" to escalate its war against Lebanon. The conditions for a cease-fire laid out by Rice, which include the deployment of an international peacekeeping force in southern Lebanon under U.N. or N.A.T.O. command, appears purposefully unrealistic. Hezbollah militants are much more inclined to die fighting than to surrender their weapons. Deployment of an international force in southern Lebanon cannot happen without the consent of the Lebanese government, in which Hezbollah plays a strong role. Hezbollah in both its military and political capacities will only agree to an unconditional cease-fire. Washington's refusal to engage either Syria or Iran, Hezbollah's patrons, further undermines the prospects for a cease-fire. It was not until Israel killed more than 60 refugees in Qana, 37 of them children, in what it has called a "mistake," that it decided to cease air attacks for 48 hours. Dim permanent cease-fire prospects suggest that the Israel-Lebanon war may escalate in the weeks and months ahead. Unexpectedly fierce resistance has temporarily stymied Israel's planned ground invasion of southern Lebanon and its attempt to create a security buffer zone. However, statements from Israeli military leaders along with the well-publicized delivery of U.S. "bunker busting" bombs to Israel indicate a new offensive may soon begin. This Israeli offensive will probably use bunker busting bombs to destroy Hezbollah's deeply buried tunnels, rocket caches and command centers in southern Lebanon. In the process, most of southern Lebanon's villages will probably be flattened leaving militants nowhere to hide or to launch ambushes from. Israel's recent massive reserve call-up suggest that a much larger ground incursion could follow this Fallujah-style bombing campaign. Israeli escalation of the war will inevitably lead to Hezbollah retaliation and further escalation. Hezbollah's leader, Sheikh Sayyed Hassan Nasrallah, has stated that his organization has the capability of striking deeper into Israel with rockets. Hezbollah rocket strikes on Tel Aviv cannot be ruled out. A large ground invasion of Lebanon by Israel could also draw Syria into the war. [See: "Intelligence Brief: Israel's Strategic Security" http://www.pinr.com/report.php?ac=view_report&report_id=529 ] Because Damascus lies less than 25 kilometers (15 miles) from Beirut, the occupation of Lebanon by Israel poses an enormous security threat to Syria. It is not unreasonable to imagine that Syria would use its own formidable Russian-supplied missiles to strike targets in Israel or Israeli military formations in Lebanon. Israel could be expected to retaliate against Syria, which would pull Iran into the war. Iranian officials have repeatedly stated during the past two weeks that any Israeli action against Syria would draw a response from Tehran. A scenario of regional war may seem extreme. However, it is unrealistic to believe that Hezbollah can be disarmed without complimentary military action against both Syria and Iran. Economic Retaliation Military escalation of the Israel-Lebanon war is possible but is not the most probable course of events that could take place in the Middle East during the next several months. Just as Washington and Tel Aviv believe Hezbollah is a proxy for Syria and Iran, much of the world believes that Israel is a proxy for Washington. Escalating military strikes against Israel will only harden Washington's support for Tel Aviv, much as Israel's escalating military strikes against Lebanon are hardening regional support for Hezbollah. The most effective way to change Israel's behavior is by taking action against Washington. The Sunni-Israeli alliance coveted by Tel Aviv and Washington has been torn apart, first by protracted Israeli military action against Sunni Hamas in the Palestinian Territories and now by Israel's war with Lebanon. Reflecting regional public opinion, moderate Arab countries pushed hard for an immediate cease-fire at the Rome conference. Saudi Arabia's King Abdullah said, "If the option of peace fails as a result of Israeli arrogance, then the only option remaining will be war, and God alone knows what the region would witness in a conflict that would spare no one." Apart from Iraq's civil war pitting the two against each other, Sunnis and Shi'a in the Middle East are coming together against Israel and the United States. Shi'a Hezbollah took Israeli prisoners in solidarity with actions by Sunni Hamas. Shi'a Iran supports Sunni Hamas while the Sunni Muslim Brotherhood in Egypt has offered its support to Hezbollah in its war against Israel. In short, the battle for the new Middle East has practically no support in the Arab world. It is also not supported by Russia. Russia is one of the many countries that has called for an immediate cease-fire in the war between Israel and Lebanon. Russia's Foreign Ministry has condemned "the unprecedented scale of the casualties and destruction" in Lebanon at the hands of Israel. Although Russia has remained largely silent recently, it is no secret that the Vladimir Putin government is a strong supporter of the regimes in Syria and Iran. Russia has supplied Syria with a wide array of sophisticated military equipment in recent years, including an extensive supply of medium range and anti-aircraft missiles. Russia also plans to build two naval ports in Syria and has far reaching economic relations with Damascus. [See: "Intelligence Brief: Russia's Moves in Syria" http://www.pinr.com/report.php?ac=view_report&report_id=520 ] Russia is Iran's primary supplier of sophisticated military equipment and has repeatedly championed Iran's nuclear cause at the United Nations and more recently at the mid-July G-8 meeting in St. Petersburg. Moscow broke ranks with the United States and Europe, recognizing Hamas as the legitimate government of the Palestinian Territories. It seems clear from Moscow's actions that Russia is siding with the countries and organizations in the Middle East that Israel seeks to destroy or hobble with Washington's consent. Conclusion As the war between Israel and Lebanon escalates, growing regional and world outrage may increasingly be channeled toward the United States -- the only country that has influence over Tel Aviv. This may encourage the world's three largest oil producers, Saudi Arabia, Russia and Iran, to significantly reduce oil exports in order to increase pressure on Washington to rein in Israel's military actions. An oil export embargo undertaken by just Russia and Iran, which together account for 20 percent of the world's oil exports, would be much more effective at extracting a major policy change from the Bush administration than Syrian and Iranian missile strikes against Israel. Economic data released by the Bureau of Economic Analysis on July 28 showed that economic growth in the United States is weakening. Because excess oil production capacity does not exist anywhere in the world, a coordinated reduction of oil exports between any or all of the world's largest oil exporters of just five percent would quickly send international oil prices toward $125 per barrel. An increase in oil prices of this magnitude could be expected to push the United States economy into recession. With the November mid-term Congressional elections in the United States approaching rapidly, those countries opposing Israel's military actions may soon act to cut oil exports and effect political change in the United States, touching off a global recession in 2007. Report Drafted By: Jephraim P. Gundzik
